MODULE 7 Overview of Risk Individuals Loss Exposures any Condition or Situation that presents a possibility of loss regardless of whether that loss actually occurs 3 Elements to a loss exposure Asset exposed to loss Cause of loss Financial Consequences of the loss Property Asset Exposed to loss Real Property land buildings crops etc Personal Property Furniture jewelry art autos watercraft etc Cause of Loss Fire theft windstorm accidents lost Financial Consequences Reduction in property value Increased expenses Lost income Property used to generate income can no longer be used Liability Asset exposed to loss Money other financial assets General Special Punitive damages Cause of Loss Claim lawsuit Civil Law vs criminal law Tort contract statutory Negligence Finance Consequences Defense Costs Monetary Damages Specific Types of Liability Property Owners Automobiles Employer Employee Parents and Children Animals Life Premature Death Asset exposed to loss Your life Cause of Loss Premature death illness accident stupidity Financial Consequences Financial Impact of Premature Death Wage earning adult Married Single with dependents BIGGEST RISK CATEGORY Single with no dependents Non wage earning adult Married Single with dependents Single with no dependents Child Life Long Life Asset exposed to loss Cause of Loss Your savings retirement wealth Outliving assets expenses income for too long Financial Consequences When happens when retired Income Expenses Which increase Which decrease Health Disability Asset exposed to loss Your health livelihood Cause of loss Financial Consequences Financial Asset exposed to loss Your wealth Cause of loss Financial consequences Inadequate savings Back to work Can t retire Poor care poor genes bad luck injury illness etc Ability to earn income may decrease or cease as in premature death Living expenses may continue or increase Evaluate same exposure categories as premature death Health disability unemployment poor planning etc Individual Risk Management Risk Management Process Determine objectives Identify risks Evaluate Risks Choose your alternatives Implement Review and Evaluate How do you apply it What are your objectives Change throughout life what do you think they will be 20 s not many people relying on you your income 30 s family life changing significant risk 40 s Your grown up and don t even know it highest this risk will ever be 50 s Risk beginning to diminish 60 s Not as big an issue 70 s Not an issue Not an Issue How do you apply it How do you evaluate Frequency severity Death only happens once but probability does vary Severity does vary based on Wealth Income Is the use of smart pills dangerous
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